Phase Out Sales Tax On Groceries

"The Arkansas Policy Foundation estimates that a family of four will save $234 a year on grocery bills alone, a
significant savings in a state where the average taxpayer shells out $3,088 a year in state and federal taxes."

Wall Street Journal, (February 13, 2007)

Freshman Democratic Gov. Mike Beebe in 2007 proposed a 50 percent reduction in the state sales tax on
groceries. The tax cut, enacted by the General Assembly reduced the grocery tax from six to three cents. Gov. Beebe has
proposed reducing the grocery tax from three to two cents when the legislature meets in session in 2009.

Arkansas is among the few states that still levy a sales tax on groceries. A 2002 Policy Foundation memo noted free
market economists have opposed food taxation for more than 200 years:

"The outstanding example is France in the last quarter of the 18th Century. The French economist A.R.J. Turgot
(1727-1781) held the important office of Intendant or Comptroller of the Finances of France for three years (1774-1776).
During that period, Turgot attempted to stop the French government's dependence on sales taxes and the corve', a
form of forced labor used against the poor. Government economists and special interest groups who profited from the
regressive tax system and corve' opposed him."

The majority of states, recognizing the tax's regressive nature, have repealed it. "The sales tax on groceries," we noted
(North Pulaski Leader, Aug. 9, 2006), "is the cruelest tax levied by Arkansas government on its citizens, who
have consistently ranked in the national basement in per capita personal income."

Arkansas is in a position to join states that have repealed their grocery tax. The state has excess revenues. The grocery
can be reduced by one cent this year. The current 3.0 percent state rate can be reduced to 2.00 percent. This represents
an approximate $30 million annual adjustment to revenues. Future reductions should be tie-barred to surpluses until the
grocery tax is phased-out early in the next decade. A gradual phase-out of the grocery tax is preferable to the
alternative: raising other state taxes to force immediate repeal.

The state sales tax on groceries should be phased-out over a multi-year period using excess state
revenues. The surplus means the grocery tax can be reduced by one cent in 2009 and again in 2011.